EU sanctions on trusts and corporate services for Russians

Trustees and corporate service providers should be aware of the latest EU sanctions against Russian individuals and entities.

In particular, a new regulation has been introduced prohibiting the provision of a registered office, business or administrative address, as well as management services, to a trust or similar legal arrangement having any of the following as a settlor or a beneficiary:

(a) Russian nationals or natural persons residing in Russia;

(b) legal persons, entities or bodies established in Russia;

(c) legal persons, entities or bodies whose proprietary rights are directly or indirectly owned for more than 50% by a natural or legal person, entity or body referred to in points (a) or (b);

(d) legal persons, entities or bodies controlled by a natural or legal person, entity or body referred to in points (a), (b) or (c);

(e) a natural or legal person, entity or body acting on behalf or at the direction of a natural or legal person, entity or body referred to in points (a), (b), (c) or (d).

Crucially, from 10 May 2022, these new sanctions will also prohibit acting, or arranging for another person to act, as a trustee, nominee shareholder, director, secretary or a similar position for such persons.

These new sanctions reflect a marked shift in scope which, until now, had been largely aimed at individuals and entities linked with the Russian government. The prohibitions apply to all EU nationals (including those based outside the EU) and those (whether EU or non-EU) doing business in the EU. However, settlors or beneficiaries that are nationals of Russia and another member state or a natural person having a temporary or permanent residence permit in a member state are exempted from the prohibitions. In addition, there are certain, very tightly prescribed, exceptions (for example, where the provision of such services is necessary for humanitarian purposes or for activities that directly promote democracy, human rights, or the rule of law in Russia).

These rules are likely to have a significant impact on organisations doing business in EU jurisdictions that have typically been favoured by Russians, Cyprus in particular. Whilst the UK, Jersey and Guernsey are not signatories to EU regulations, offshore trustees operating structures with an EU nexus settled by or held for the benefit of any Russian nationals will be captured under these new regulations. It remains to be seen whether the UK will introduce a similar regime in the near future.

The scope of this new regime is expansive and the deadline for compliance is extremely short. Therefore, it is imperative that any organisations potentially within scope of these rules seek advice urgently as to their obligations and next steps. 

David Whittaker, Carol Katz & Filippo Noseda, Mishcon de Reya